Fragility Stays as Rate Kept at Historic Lows

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With weaker than expected growth in the July to September period, the Bank of Canada lefts its overnight rate unchanged at 0.25%.

In the midst of this announcement, TD Bank has noted that Canada’s recovery is so fragile that the central bank’s Governor Mark Carney will have to hold the overnight rate at an all time low until late next year.

This is several months longer than Carney had previously said the bank would wait to help stimulate business activity.

TD Bank has said that with current trends, it indicates that a return to full economic output will be delayed until the April through June period of 2012, 6 months later than what the central bank predicted.

TD Bank has noted that they believe that the Bank of Canada will stay put past its conditional commitment of June 2010, and the first rate hike will not take place until the fourth quarter of 2010.

Just a few months ago, we saw analysts were speculating about a stronger than predicted rebound by the Canadian economy which would force Carney to backtrack on his plan to keep the overnight rate at the 0.25% level until next summer.

However, this optimism was gone after the performance of the economy in the third quarter.

The central bank noted that global economic developments have been slightly more positive than was expected in October.

The next scheduled date for announcing the Bank’s overnight rate target Is January 19th, 2010.

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